The Boiling Tea Kettle of Economic Hell

This morning, I see so many terrifying, ominous portents – coming at me from so many different directions – I actually had a difficult time homing in on a single topic. Which is why, I believe, today’s title is appropriate. And by “terrifying, ominous portents,” I mean the “Big One” has unequivocally commenced – with only the complete loss of control of “last to go” markets like the relentlessly supported “Dow Jones Propaganda Average” and massively suppressed paper gold and silver markets standing between the terrifying global mindset of late 2008, and any remaining hope of a return to some type of (miserable, decaying) “normalcy.” Let’s face it, the era of “belief that Central banks can save us” is coming to an ignominious end. And if you think last week’s historic launch of the nuclear phase of the “final currency war” was a big deal; when the Chinese commenced the globally cataclysmic, soon-to-accelerate process of devaluing the Yuan – accelerating the horrifying collapse of commodities, currencies, equities, and high yield bonds that has been raging unabated for the past year – you ain’t seen nothing yet.

And nowhere is this “economic hell” more obvious than the explosive growth of “alternative media” websites like the Miles Franklin Blog; as in an ugly world of propaganda, stupidity, and lethargy, the TRUTH “sells” at an extremely high premium. To wit, in yesterday’s “unprecedented, universal fear,” I wrote of how Andy Schectman, David Schectman and myself – as well as our team of seasoned brokers – have never spoken to so many people, from so many walks of life, with such an overwhelming fear of what’s coming. As for me personally, not only are my articles and podcasts experiencing record amounts of readership and viewership; and easily the most positive feedback since joining Miles Franklin four years ago; but my email inbox is on fire with questions from fearful followers.

Many are related to how one can go about buying Precious Metals; or transferring Precious Metals accounts; engaging our Brink’s storage facility in Montreal, Canada; or learning of how existing accounts like IRAs can be utilized to hold gold and silver. However, just as many are asking for garden variety “financial advice” – such as how to “escape” from government-sponsored retirement plans like pensions and 401ks; whether to buy a home or invest one’s savings; whether to take out mortgages; what types of mortgages; and most commonly, will debt be a “good” thing in a hyper-inflation and/or “debt jubilee” situation (to the latter question, the answer is a decided NO).

Equally telling, the percentage of young people asking such questions – many, without significant capital to handle an increasingly unstable, uncertain future – has never been higher. In other words, when we write of “statistics” like historical lows in labor participation, real wages, home ownership, and government approval; and conversely, historic highs in debt of all kinds, government entitlements, and the cost of living (notwithstanding propagandized “deflation” fears), we are not just typing words. To the contrary, we are speaking of the sheer horrors government printing presses – and other government macro-management efforts – are causing at an accelerated, in some cases hyperbolic, rate. Not to mention, the manipulation of financial markets of all kinds; which as the entire world can now clearly see, are not only “backfiring” in an historic manner, but setting the stage for the most terrifying political, economic, and social cataclysm of modern times.

As history’s largest, broadest fiat Ponzi scheme rapidly crumbles to dust – with, on a nearly hourly basis now, additional equity, currency, and commodity markets horrifically imploding – the volume of the “weapons of mass financial destruction” our “leaders” have destroyed the world with is being turned up still higher; particularly in the aforementioned “last to go” markets – like the world’s largest stock indices, and the “canaries in the coal mine” gold and silver represent.

I mean geez, Monday’s market action was so bad – following equally terrifying plunges Friday – that even the MSM was calling it “Black Monday.” The fact that Friday and Monday’s combined Dow decline was just 6.5% – compared to the real Black Monday in 1987, when the Dow plunged 22.5% – demonstrates just how jaded today’s ignorant money managers and financial journalists have become to relentless PPT support is another story for another day. That said, it’s not just equities that continued their horrific plunge Monday – but commodities, currencies, and high yield bonds, the world round. And thus, when China’s stock market plunged another 7.8% Tuesday morning, with WTI crude sitting at a seven-year low of $39/bbl, seeing European and U.S. stock futures up 3%+ Tuesday morning was truly an incredible, PPT-inspired sight to see. Let alone, as yet again gold and silver were attacked with the same tried and true algorithms, at the same times of day, amidst an environment of soaring, record demand.

By day’s end, an initial 450-point Dow gain ended in a horrific 205 point loss, with most of the losses occurring in the day’s final hour, amidst the biggest Dow intraday reversal since…drum roll please…October 29, 2008. Commodities modestly bounced – not gold and silver, of course, which “somehow” managed to lose their safe haven status, amidst an utter blizzard of paper naked shorting and ragingly bullish news developments – on Miles Franklin’s strongest, across-the-board day of physical buying all year, featuring shortages so acute, we are now quoting 4-8 week delivery times on popular products like Silver Eagles and Silver Maples.

Subsequently, Chinese stocks again declined last (Tuesday) night; and this, mere hours after the PBOC lowered interest rates and reserve requirements; further restricted stock futures selling; and devalued the Yuan to its lowest level in four years. Simultaneously, commodity prices of all types plunged; and European stocks declined another 1+%. And yet, “incredibly,” I looked at my screen as I awoke, to not only see gold and silver down (“same BAT-algorithms, same BAT-times”), but Dow futures up 300 points! I mean, this is sheer PPT insanity; as not only are global markets of all kinds going up in flames, but the global economy is amidst a freefall phase that is just starting. And just wait until this month’s horrifying crude oil, commodity, equity, high yield bond, and currency collapse incorporates itself into upcoming global economic data; corporate, institutional, and government spending plans; and oh yeah, the earnings reports of thousands of publicly-listed companies.

Even more incredibly, the financial media – such as CNBC, with its record low viewership and likely criminal collaboration with Apple’s CEO, Tim Cook on Monday – is still discussing whether the Fed will raise rates by a measly eighth of a percent next month! Yes, amidst an historic, across the board crash in essentially all types of financial markets; imploding economic data; exploding currency wars; surging geo-political tensions; the pending collapse of the European Union; and unprecedented global debt loads – with Central banks like the Fed leading the way; this ridiculous topic continues to be bandied about by the “fumes” of the miserably failed economic “recovery” propaganda campaign that started 2½ years ago.

As still more miserable economic data is reported – and this, before the impact of this month’s markets crashes insinuates itself into the economic data picture – Citibank says their September rate hike prediction is a bit more “shaky,” but still they expect it because incoming economic data remains strong. “Strong?” Really? Conversely, Ray Dalio, who runs the world’s largest hedge fund (Bridgewater), actually believes QE4 will be announced in September – which frankly, appears far more likely, particularly if financial markets continue to melt down. And geez, AS I EDIT, NEW YORK FED PRESIDENT BILL DUDLEY JUST SAID A SEPTEMBER RATE HIKE IS “LESS COMPELLING, BUT HOPEFULLY WE CAN RAISE RATES LATER THIS YEAR.”

I mean, even Twilight Zone writers couldn’t make this stuff up; particularly when the primary reason for this week’s incredible “resilience” of the benchmark 10-year Treasury yield is not due to “rate hike fears”; but to the contrary, the BLOCKBUSTER NEWS we learned last night, that China sold a whopping $106 billion of U.S. Treasuries in the past two weeks alone, or 8% of its total holdings. And trust me, it’s not “coincidence” that an explosion of selling from U.S. Treasuries’ second largest holder (with only completely bankrupt Japan holding more) occurred simultaneous with the PBOC’s nuclear devaluation strategy launch – putting incredible pressure on U.S. bond prices at a time when “traditional” investors continue to buy them hand over fist, under the increasingly diminishing premise that the Fed can keep rates at record low levels indefinitely – without stoking hyperinflation – simply by waving its “QE wand to infinity.”

Meanwhile, incredibly, whilst the “net change” in stocks, commodities, and currencies (following this morning’s PPT-inspired surge, assuming it lasts longer than yesterday’s); and utterly exploding physical demand (at least at Miles Franklin, and the U.S. and Canadian Mints); Precious Metal “prices” have been violently attacked in the same, blatantly obvious manner as always; with, as I speak Wednesday morning, paper silver having just plunged below $14/oz; i.e., a new six-year low, last seen during the heart of the 2008-09 crisis! Hence, the additional “black box” naked shorting by largely unregulated HFT traders.

My friends, all I have written of physical demand strength – and supply tightness – is as real as the aforementioned collapse of the average American’s finances. And given the combined impact of historic financial crashes, money printing, currency wars, and economy-crippling market volatility (i.e., the “single most Precious Metal-bullish factor imaginable”), I expect the current, essentially suicidal Cartel raids to yield a further explosion of physical demand, at a time when supplies are already historically tight. Once again, increasing the odds that a 2008-style shortage rears its ugly head far sooner than most can imagine.

And speaking of stupidity, how could a new six-year low in paper silver prices not be accompanied by a discussion of the hapless PM miners – who continue to destroy themselves with inaction. To wit, just this morning, mere hours after WTI crude plunged below $40/bbl for the first time since late 2008, the world’s largest oilfield service company, Schlumberger (which I diligently “covered” on Wall Street for seven years) is acquiring Cooper Cameron, the world’s largest manufacture of blow out preventers (which infamously, built the “BOP” used on the Deepwater Horizon that failed when BP drilled “into hell” in the Gulf of Mexico). When I was a Wall Street energy analyst in 1999, and oil briefly dipped below $10/bbl, nearly every energy company on the planet (that didn’t go bankrupt) merged to cut costs, given corporations’ innate survival instinct. In mining, however, the current crop of moronic CEOs are clearly intent on either going bankrupt entirely, or relying on crippling debt or hideously dilutive equity (which may or may not be available in the coming months) to survive, as the Cartel kicks out what’s left of their legs.

Earlier this year, I went on record predicting a massive consolidation wave will imminently sweep over the dying mining industry like a tsunami, causing dramatic plunges in what’s left of both production enhancement strategies and capital expenditures. And given the current, 2008-like Cartel raids on paper gold and silver prices – amidst an equally 2008-like collapse of commodities and high-yield financing, it’s difficult to envision such a scenario being delayed beyond September. As frankly, at current price levels, I believe many accounting firms, as they did two years ago, will force mining clients to recalculate reserves and “resources” at the end of the third quarter, as opposed to waiting for the typical year-end revisions. In other words, many mining companies (both Precious and base) are hopelessly insolvent as we speak; as once said revisions are incorporated into miners’ balance sheets – via massive write-downs – many will see their debt covenants violated, resulting in a run on the remaining “equity.” In other words, we are about to see some massive mining bankruptcies – which will not only cause equally massive declines in both gold and silver production; but potentially, permanently disable the industry’s ability to keep up with relentlessly rising demand.

Well, hopefully this dollop of reality adds to your cumulative understanding of just how dire the global economic situation is becoming – and just how much of a gift the trapped rats TPTB have become have given you, in “pricing” Precious Metals so far below the cost of production, that not only is supply vanishing, but the entire PM mining industry.

20 Comments

The old saying goes “Buy land, they are not making any more of it”
It’s unfathomable that TPTB would destroy the mining industry, unless that were their intent.
Perhaps the new saying will mirror the old” Buy precious metals, they are not making any more of them?”

No on the first! They are not trying to destroy the industry, they were just trying to destroy SENTIMENT toward miners. The industry was just collateral damage, which will come back to destroy them.

But Yes on the second! As due to the mining industry’s collapse, supply has unquestionably peaked – and may well collapse, particularly in silver b/c half of all production is byproduct of base metal mines, which are in even worse shape.

Bill
on August 26, 2015 at 12:19 pm

Even Twilight Zone writers couldn’t make this stuff up …

And at the exact time you were writing this, it was announced that, for some mysterious reason, Whirlybird Janet is avoiding the Jackson Hole Summit (along with several Fed Governors — they’re not saying who just yet) … Dudley took September rate hikes off the table (“Hope we can raise them this year”) sending the USDJPY down sharply … the Chinese have launched another major “what happened and why” investigation … and the croaking frogs on Wall Street and the MSM are chirping another chorus of “Remain Calm – All Is Well”.

You are so right … even Twilight Zone writers couldn’t make all this up.

Firstly, many thanks for your continual hard and diligent work in the reporting of macro economic events, your views continue to both timely and very informative.

Consequently, please may I ask how Miles Franklin think gold and silver will respond to deflation. As I’m struggling to locate an answer on-line that I can clearly comprehend, but I’m confident it’s an issue you have considered already.

Many thanks,

SD

Bill Mitchell
on August 26, 2015 at 4:41 pm

How interesting it will be watching the parade of earnings for the rest of the year. Likely declining earnings. The QE will rise commensurately with PE

Earnings were collapsing BEFORE this month’s stock, commodity, and currency implosion.
a

bernie shephard
on August 26, 2015 at 4:42 pm

is this stupid or let us say jp morgan keeps buying physical silver as it forces and keeps the price down until it acquires lets say one million ozs at an average price of $16.00 now they let the price rise even help it go up to $26.00 now they sell it all to the us mint to make eagles once the mint has sold them for 28,29 or 30 and has their cost back plus jp morgan begins again manipulateding the price down again end result mint does not lose jp makes ten million and over time the process is repeated yes us mint would have to cooperate but is too unlikely ? ? ?

I don’t believe anything they say, although it would make sense that they are buying. They are no dummies, they know what’s going on.

That said, silver is just a “loss leader” (aside from making money on collusive naked shorting raids like today), in pursuit of maintaining market confidence.

a

Po Rich
on August 26, 2015 at 10:24 pm

Hi Bernie,
What you are suggesting seems like “the story of everything”
investment wise.
It has been several decades since financial markets even seemed to match the textbook definitions of time long past (investment of capital into production).
It has all just become an extraction of wealth by the largest “players” (riggers).
I sometimes wonder how quickly better off most would be if such speculative markets were simply replaced by fixed rate/duration bonds when an individual/organization wanted to raise capital. It would certainly eliminate much of the “cost” of the middlemen, and perhaps also much of the risk “post inception”.
With most commodities and services now managed by a relatively few mega concerns, I think the time for a futures market supposedly existing to iron out wide swings in a market, has passed.
What is more cost effective than an economy simply based on supply, transportation, and demand? Centralization (or supposed economy of scale) prohibits regional or local growth, and I believe this to be the largest factor in the continuing decline of the quality of life.
To simply reply to your question, yes, of course, it is being done all the time, in may ways, by those who may, truly something for nothing on the grandest scale.
The small entrepreneur through their work can possibly turn their 10’s into 20’s. But where is the comparative value when the large players can turn 10 million (of borrowed money, perhaps)into 20 million, rapidly, perhaps just with a few keystrokes or a few phone calls? It is a rigged game for the elite at various levels, and they want to be sure you never get a chance to play. Hope you win!!!

Norse
on August 26, 2015 at 10:19 pm

Thanks Andy on putting the pieces together for us… Maybe TPTBeee think if they can only get Silver cheap enough, no one will want it — Hello, the Twilight Zone
is calling.

Andy, let’s assume I have $20,000 I want to put in Montreal in gold. I assume that you buy gold for me in coin form, today, at a 20% premium and store it there.

Question: not trying to be smart, because I know you have zero tolerance for such…

Two unfortunate occurrences happen: the price of gold in this deflationary binge we are in drops to $800 from $1130 – certainly possible as a momentary adoration in the environment we find ourselfs in… and I have to sell for undesirable reasons the stash I have in Montreal..

COMEX is now $800

But Miles Franklin is selling to new buyers at $800 Comex plus a 50% premium above the cash price, or $1200 because that is the going premium for deliverable gold.

What price to I get on my sale? $800 or something just short of $1200 per oz. for that which I deposited with you…in Montreal?

You are overthinking things. Plus, you are fabricating premiums. We sell at market prices, and promise the highest buyback price in the industry to our clients. And if premiums rise due to shortage, as they did with gold in 2008, and are with silver NOW, that’s what we buy at.

And forget COMEX, as there are always a few percentage points of spread in all trades. Just like buying a house.

Po Rich
on August 27, 2015 at 6:37 am

Hello Andy,
I have been in retail for many years and just
don’t understand the markup (premium) in pms.
If demand is higher, and wholesale prices are falling,
one would think that the higher cost old stock would
quickly be depleted, and the cost of the premium would
diminish somewhat to reflect the newer lower wholesale price. For the present, supply is still constant at the retail level, so “boutique” pricing for scarcity isn’t
a factor.
If volume (sales) is higher, it seems that the financial
targets could be met through increased sales albeit at a lower price.
Being “ignorant” of the formula, it somewhat appears that
this is a secondary level of price fixing in a market that
appears rigged at the top.
I don’t mean to be insulting or imply any industry improprieties, but simply don’t understand why the precious
metals market seems to function in a different way (at the retail level) from others…including those that have to deal with the ramifications of spoilage, etc.
I enjoy your writings, I could rant all day if I had a good audience too! If you could shed a little light on this it would leave me another space to wonder about “other things”.
Best wishes

You, too, are overthinking things. We don’t have “inventory,” as we are dealers, not traders. There are always markups related to “spread” costs, like marketing, transportation, etc. Premiums, however, rise and fall with demand and supply, just like houses.

There is no “formula,” it is just supply and demand. The key is to buy when premiums are low – but most, per the sheep-like nature of humanity, don’t. That’s why no one wanted metal last year when premiums were low, but everyone wants them now – with premiums surging, and liquidity tight.

I will be going over this on my podcast with Andy Schectman tonight.

Marty Fields
on August 27, 2015 at 7:08 am

Andy
Thanks for your lucid viewpoint which is gone in the regular media. My issue is that regular people who talk with me all the time, you know, not the ‘financial types’ all see what’s going on clearly and are afraid while the ‘financial types’ keep this ‘everything is great’ line of chatter. I guess the more ‘education’ you have the less you know?

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